China’s Ministry of State Security issued a fresh warning this week about overseas spy agencies and what it says are their efforts in recent years to obtain state secrets under the disguise of consulting agencies.
The six-minute video released Thursday on the ministry’s official WeChat social media account reenacts what it says was a real case where overseas spy agencies instructed a consulting firm to steal classified information from a Chinese company seeking to invest abroad.
The release of the video comes as Chinese leader Xi Jinping met this week with American CEOs in a bid reassure them that China remains open for business, despite concerns about its economy and worrying signals from the authoritarian government.
Over the past year, foreign investment in China has shrunk as supply chains shift to other countries while Chinese authorities have rolled out a new anti-espionage law and used exit bans to keep business executives and others from leaving the country. It has also carried out raids on consulting and due diligence firms.
During the same period, the Ministry of State Security has ramped up its use of social media to raise the alarm about foreign spies.
Its latest video — the fourth since it launched its social media account last year — has the feel of a spy thriller with dramatic music and fast-paced video elements and graphics.
It tells the story of an executive at a Chinese company who is pressed by a consulting firm representative on a string of questions, including the company’s total profit, the technical parameters of its products, and how its products are used by the Air Force.
In a WeChat post released with the video, the ministry warned about the national security risks that consultancy agencies pose.
“The seemingly normal investigation conducted by consulting firms are in fact attempts to illegally acquire our commercial secrets and efforts to suppress our advantageous industries,” the ministry wrote, adding that these consulting firms are accomplices to foreign spy agencies aiming to infiltrate key sectors in China.
Intimidation campaign against Chinese citizens
Some experts say the video is tailored to the Chinese audience rather than foreign investors since the video is purely in Mandarin and features the arrest of a Chinese national working for a foreign consulting firm.
The purpose of the video is “to inform and intimidate Chinese citizens by telling them that the government is watching them,” said Dennis Wilder, a former U.S. national security official. He added that the campaign will likely create a chilling effect among Chinese citizens, especially those working for foreign companies.
Over the last year, Chinese authorities have raided several American companies’ offices in China and detained some of their Chinese employees. Companies affected include due diligence firm Mintz Group, business consulting firm Capvision, and management consultancy Bain & Company.
Chilling effect for new foreign businesses
While the campaign focuses on Chinese citizens, Wilder said Beijing’s efforts to safeguard national security will also create a chilling effect for foreign businesses trying to enter the Chinese market.
Unlike big foreign companies with an established presence in China, such as Apple or Qualcomm, he said companies that have no presence in China need to conduct due diligence. “They have to understand what their counterparts in China are all about, but if they can’t conduct due diligence, they won’t invest in China,” he told VOA in a video interview.
A survey conducted by foreign business groups in 2023 suggests foreign companies are increasingly pulling investments and operations out of China. Survey data show that only 45% of American companies view China as their primary or among their top three investment destinations while 66% of the companies surveyed by the European Union Chamber of Commerce in China said they found operating in China has become increasingly difficult.
Despite foreign companies’ lack of confidence in the Chinese market, some analysts say the Chinese government thinks efforts to safeguard national security and enhance foreign investors’ confidence in the Chinese market are not mutually contradictory.
“Beijing believes that while they try to attract more foreign businesses to invest in China, they also should ensure key national interests, such as core data or key infrastructure won’t be easily obtained by foreign businesses,” said Hung Chin-fu, a political scientist at National Cheng Kung University in Taiwan.
He said Beijing’s approach will be met with deep suspicion among foreign businesses. “At a time when the Chinese government has laid out many red lines in the name of national security, investing in China will be like walking on thin ice for foreign companies,” he told VOA by phone.
As foreign businesses will likely remain hesitant to increase their investment volumes in China, Wilder thinks Chinese leaders may have different views on whether to prioritize efforts to attract more foreign investment or the need to safeguard national security.
“For Xi Jinping, I think if he has to choose between foreign investment and economic growth and what he perceives as national security, he will always come out on the national security side,” he told VOA.
But for other Communist Party leaders who must consider economic growth, such as Chinese Premier Li Qiang, Wilder thinks their consideration will be different from Xi’s.
“The work to reform the hardware and software needed to support foreign bank card payments should speed up, and the possibility of developing touchless payment methods should be explored,” the State Council document said following a policy briefing on optimising payment methods last week.
“Bank card clearing institutions would be urged to be in line with international payment platforms.”
Boon for expats, visitors as China approves Mastercard’s card clearing licence
Boon for expats, visitors as China approves Mastercard’s card clearing licence
The document also vowed to impose greater punishments on shops that reject cash and also offer more foreign currency exchange and cash services to ensure “a seamless connection” between local and foreign payment markets.
Banks and payment institutions were also requested to make the process of opening an account easier.
Following the release of the State Council document, the top players in China’s digital payment market, including Alipay, WeChat Pay and UnionPay, issued statements vowing to improve services in accordance with the guidelines.
But Joe Mazur, senior analyst at Beijing-based consulting firm Trivium China, said the approach was part of efforts by Chinese policymakers to give “easy but marginal wins to foreign business in lieu of addressing their main concerns”.
“Easier payments for foreigners could help at the margins, but it doesn’t address the main concerns that foreign investors have about China, including the lacklustre economic recovery and worries about personal security,” Mazur said.
Raffa Vincenzo, vice-president of the Italy-China Association of Business, described the document as a “positive step”, but also said more work was needed.
“At the same time, we welcome further steps in addressing remaining challenges like differences in payment practices and the legal environment to build a fair and sustainable environment for all,” he said.
Beijing has vowed to remove more financial barriers for foreigners and improve access for overseas firms in its financial market against a backdrop of challenges in enticing tourists and foreign investment after it relaxed its coronavirus controls last year.
Low social status and income: why ‘people are reluctant’ to be carers in China
Low social status and income: why ‘people are reluctant’ to be carers in China
China has long limited the use of foreign bank cards due to Beijing’s rigid financial and data controls.
While its mobile-payment penetration rate has reached 86 per cent domestically, according to the state-backed Xinhua News Agency, non-mobile users and foreigners who were unable to use payment methods such as Alipay and WeChat Pay without a local bank account still face hurdles.
Mobile devices are used to pay for everything in China, ranging from food delivery to holidays.
And many businesses no longer keep change for cash transactions despite only slightly over 64 per cent of internet users aged over 50 in China having used mobile payment services, data firm Statista said in January last year.
The People’s Bank of China and various ministries have established working groups to make payment easier for foreigners.
In China today, many identify with Huang’s consumption mentality, with domestic gold prices reaching new highs last year, and the retail market witnessing a gold rush.
And as China’s stock market struggles to recover, denting investor expectations, consumers with limited access to overseas investment products have turned to gold as a safe-haven investment, even though purchasing bars or jewellery at retail outlets would incur extra processing fees.
The retail gold buying spree is particularly seen in lower-tier cities and less affluent counties, said Fred Qu, a business development manager of a jewellery brand focusing on the east China market.
And with houses in smaller cities and counties not selling well and experiencing a significant decline in prices, gold has been favoured by young people despite its soaring cost, he added.
Why a weak yuan is spurring a retail gold rush in China
Why a weak yuan is spurring a retail gold rush in China
The annual consumption level of gold jewellery per capita in third-tier cities and below increased from 460.7 yuan (US$65) in 2017 to 617.5 yuan in 2022, with a compound annual growth rate of 6 per cent, according to state broadcaster CCTV.
The growth rate surpassed the increase seen in first- and second-tier cities, as well as the national average level, the channel added.
During the global economic downturn, gold, with its strong wealth preservation characteristics tends to be valued by more investors, said EqualOcean analyst Zhuang Jinglun.
According to the National Bureau of Statistics, from January to November last year, retail sales of gold and silver jewellery increased by 11.9 per cent, year on year, surpassing overall retail sales of consumer goods, which grew by just 7.2 per cent.
In recent years, jewellery businesses recognising the purchasing power of the lower-tier markets ramped up their investment in third- and fourth-tier cities.
Along a street less than 200 metres (656 feet) long in Quzhou, a prefecture-level city in the eastern province of Zhejiang, most of the 15 gold jewellery stores have opened in the past two to three years, CCTV reported.
According to Chow Tai Fook’s interim report for April to September, the expansion into lower-tier cities aligns with its overall brand strategy.
As of the end of September, the distribution of its point-of-sale locations in China had increased to 7,699 from 3,835 in March 2020.
Reluctance to marry, have kids continued in 2022 amid China’s population woes
Reluctance to marry, have kids continued in 2022 amid China’s population woes
Of all its locations, 45.5 per cent were located in third and fourth-tier cities and below, up from 33.3 per cent in March 2017.
“Gold jewellery and products continued to be buoyed by consumers, despite the strength in gold price,” the report said.
From April to September, its revenue from gold jewellery and products increased by 12.8 per cent, the report added.
In contrast, as a weak macro environment weighed on discretionary purchases, revenues for gem-set, platinum and k-gold jewellery had declined by 18 per cent during the same period, it added.
Gold also has a well-established recycling mechanism, while diamonds face difficulties and have a high depreciation rate, EqualOcean analyst Zhuang added.
And amid the current sociocultural shift, there is a waning belief in the myth that diamonds are forever, resulting in a noticeable decline in demand for diamonds, Zhuang said.
The improvement in the craftsmanship and the more exquisite design of gold jewellery influenced primary school teacher Huang, she added, along with the high price of diamonds.
Due to the approaching Lunar New Year, many young people are returning home for blind dates and to get married, resulting in a high demand for gold jewellery, with many designs focusing on wedding and marriage themes, added jewellery brand manager Qu.
“At the end of the year, those who buy gold jewellery mainly focus on pieces with larger weights,” he said, pointing to gold bracelets and necklaces.
In mid-September, the retail price for gold from main brands, including Chow Tai Fook and Chow Sang Sang, had risen to 600 yuan (US$84) per gram before peaking at around 630 yuan per gram around the beginning and end of December.
The price declined slightly in the last two days of 2023, but it has fluctuated around 625 yuan per gram since the beginning of the new year.
2. China’s shipping containers pile up at overcrowded port as overseas orders dwindle
(Ji Siqi – February 20, 2023)
Although the Lunar New Year holiday ended weeks ago, not all truck drivers in Shenzhen are back to work. On the expressway heading towards Yantian International Container Terminal, several trucks with no containers on their long trailers can be seen parked on the roadside, part of a static convoy that stretches nearly a kilometre (0.62 miles).
“These are only a small portion [of all the empty trucks]. The rest had to be parked in Dongguan,” said a driver surnamed Huang, referring to another city in Guangdong that is an hour drive away from Yantian – one of the biggest Chinese container ports for foreign trade.
Huang is one of the lucky drivers. He had just unloaded a container at the terminal on a Friday afternoon. He said the port has more than 15,000 registered truck drivers, but only around 2,000 of them now have work.
3. China’s bid to lure overseas tech talent home hits a snag: the sector’s toxic work culture
(Ji Siqi – February 19, 2023)
After being caught up in a mass lay-off at Amazon in January, Canada-based software engineer Mark Liu boarded a flight back to his hometown in central China.
The 30-year-old decided to take a rest at home and spend some time with his parents and grandparents, while preparing to look for a new job. But he will not be looking in China.
Liu is still seeking opportunities in Canada, even though the current wave of tech lay-offs there shows no sign of ending.
4. China’s durian demand is a godsend for Philippine trade, but for other Asian countries ‘durian diplomacy’ raises concerns
(Ji Siqi, Ralph Jennings, He Huifeng– February 15, 2023)
More than 900km southeast of Manila, Davao City is dubbed “Durian Capital of the Philippines”. With the volcanic soil of Mount Apo said to give the pungent “king of fruit” a unique flavour, the region accounts for almost 80 per cent of all durians grown in the country.
But now, even the local durian market in Davao is in short supply, as large amounts of the existing harvests have been reserved for China.
It all began with a new bilateral agreement signed between the two countries in early January, following the state visit of Philippine President Ferdinand Marcos Jnr to Beijing, which opened China’s door to fresh Philippine durians for the first time.
5. How are Chinese firms responding as foreign buyers ‘don’t want anything made in China’?
(He Huifeng, Luna Sun, Kandy Wong – May 25, 2023)
The writing is on the wall when it comes to the future of Norman Cheng’s operations in China, and like the protection offered by helmets his company produces, he sees a shift away from China as a matter of self-preservation.
To that end, he intends to open a smart factory in Vietnam next year – a US$30 million undertaking that embraces automation and will essentially be a replica of the plant he opened just last month in the southern Chinese manufacturing hub of Guangdong province.
The decision by one of the world’s largest helmet makers, Strategic Sports, was a long time in the making, and it was not borne out of capacity concerns. Cheng says they have plenty of that in China, where their first automation plant went into operation two years ago, capable of producing millions more helmets a year.
6. Thailand wants to build a brand new shipping route. Why isn’t China buying?
(Frank Chen, Kandy Wong – November 27, 2023)
When Beijing goes on the hunt for weak links in its economic chain, the Malacca Strait is a place Chinese officials and academics often cite as a point of exceptional vulnerability. Many essential materials – particularly crude oil and minerals, which carry vast strategic importance – are shipped through it.
The latest option to come across Beijing’s desk is the Land Bridge project in Thailand, which uses rail links to connect the Andaman Sea and the Gulf of Thailand and bypass Malacca entirely.
7. China to widen Asean trade with first major waterway in 700 years, but will Pinglu Canal be a game changer or white elephant?
(He Huifeng– July 24, 2023)
Chinese authorities like building roads and bridges from times gone by, as connectivity facilitates flows of people, goods and also fortune. But only a few can afford to construct canals that demand massive amounts of labour and mastery of technology.
Over 2,200 years ago during the Qin dynasty, China’s first emperor built the 36.4km (22.6 mile) Lingqu Canal to carry soldiers to conquer the southern tribes and expand the imperial territory.
Qin Shi Huang’s mega project connected Xiang River in Hunan province – a tributary of the 6,300km (3,915-mile) Yangtze River – and Li River in south China’s Guangxi Zhuang autonomous region.
8. Could China’s durian-farming ambitions end up testing Thai and Malaysian market dominance?
(Ralph Jennings, Mia Nulimaimaiti – May 22, 2023)
Malaysian durian expert Lim Chin Khee visits China every two months to help farmers grow the pungent tropical fruit.
Among the advice that the founder of the Durian Academy, near Kuala Lumpur, dispenses to growers of plantations larger than 404 hectares (1,000 acres) is to avoid wasting water and fertiliser.
Malaysia, meanwhile, exports high-end frozen durians from smaller farms to China, a rapidly expanding tropical fruit market for much of Southeast Asia.
9. Tech war: starved of chips, China’s bid to topple US as No 1 economy faces ‘unprecedented’ pressure
(Frank Tang, Ji Siqi – February 8, 2023)
Semiconductor chips are often compared to the beating heart driving technology innovation. But with the United States restricting exports of critical semiconductor components and technology to China, questions are mounting over how long the world’s second-largest economy can maintain a pulse.
Core technologies are China’s Achilles’ heel, despite having the world’s strongest industrial manufacturing capability, and they are easy prey for Washington in its strategy of tech containment.
Without mastery of the fiendishly complex chips that power everything from cars to smartphones, President Xi Jinping’s hopes of transforming China into the pre-eminent global digital power, while surpassing the US to become the No 1 economy in the world, could fall apart.
10. China’s home-grown C919 could break Airbus, Boeing duopoly with ‘brave step into foreign markets’
(Amanda Lee– January 18, 2023)
China’s home-grown narrowbody passenger jet could break the duopoly of Boeing and Airbus in its home market and beyond, despite its reliance on foreign parts, according to a report by a Berlin-based think tank.
The Mercator Institute for China Studies (Merics) argued that the size of China’s aviation market, strong industrial policy and a sector dominated by state-owned companies give the C919 an edge to advance the country’s “strategic objectives” in aviation.